… But The Exorbitance Affirms that College Athletics Spending Habits Don’t Make Cents
Athletics Veritas is a weekly series aimed at helping higher education executives, faculty, and other stakeholders stay tuned in on trending national issues impacting college athletics, especially NCAA Division I. Athletics Veritas is created by senior DI athletic administrators around the nation.
Coaches’ Salaries & Buyouts Make for Bountiful Stocking Stuffers…But The Exorbitance Affirms that College Athletics Spending Habits Don’t Make Cents
Head coaches being paid million-dollar buyouts not to work
Football assistants at Power 5 institutions not taking pay cuts during a pandemic
Five college football coaches have buy-outs over $30M each
Congress, university leaders, and student-athletes calling out coaches’ outrageous pay
Creating federal anti-trust exemption to limit college coach pay floated
December is a time when universities across the country wrap up the fall term’s final exams, campuses become sparse with activity, and students, faculty, and staff head into the winter break to enjoy the holidays before the New Year.
Late in the calendar year is also a time when decisions with significant financial consequences pop up in the Division I stratosphere, often due to head coaching changes among Power 5 FBS programs. The year of the pandemic wrought financial strain for athletic departments that compelled many Division I schools to make difficult decisions of austerity (e.g., staff furloughs, reductions in force; dropping sports) within their athletic departments due to shriveling revenue streams.
Amid that backdrop, let’s take a few headlining examples from 2020 that reflect the ballooning dollars and excess that are becoming more commonplace in Division I and consider them against the DI principle of prudent fiscal practices as well as the growing appetite among stakeholders to curb the escalation of coaches’ salaries.
NCAA Division I Constitution 2.16 outlines the “Principle Governing the Economy of Athletics Program Operation.” Specifically, the principle sets forth that intercollegiate athletics programs shall be administered in keeping with prudent management and fiscal practices to ensure the financial stability necessary for providing student-athletes with adequate opportunities for athletics competition as an integral part of a quality educational experience.
The recent wave of multi-zero transactions involving coaches’ compensation, including two instances in which individuals were paid millions of dollars to not work, raises the question of how Division I’s fiscal practices comport to the principle above or, more plainly, fundamental business sense (or cents).
As reported by Knoxville News Sentinel, Tennessee’s athletic department, like many athletics departments -- including Power 5 programs -- have done in 2020, instituted austerity measures to manage sparse revenues and reduce expenses. Specifically, Tennessee instituted a tiered salary reduction plan for employees earning more than $50,000 annually effective November 1 through the remainder of the fiscal year. The pay cuts, which were communicated to athletics staff in September, are expected to save up to $1.6M over the eight-month period with reductions to annual compensation.
However, eight Tennessee assistant football coaches refused to take any pay cut despite reduced revenues due to the pandemic. The eight assistant coaches’ pay ranges from $200,000 to $1.6M per year.
Like most Division I coaches, the Tennessee assistant football coaches are under contract so their inclination to take a pay cut is a negotiable matter rather than a one-sided mandate from their employer. Their contracts likely did not include an automatic salary reduction due to a pandemic. On the other end of the spectrum, at-will employees in athletics departments and across campuses have been accepting predetermined, department- and campus-wide salary reductions (which doesn’t even take into account individuals who lost employment altogether). Tennessee is certainly not the only Division I institution with highly paid coaches under contract. And Tennessee’s assistant football coaches are not the only highly compensated assistant football coaches who did not reduce their salaries to help their institutions manage a pandemic-bruised budget. In a recent USA Today compilation of FBS assistant football coaches’ salaries, the data shows that assistant coaches from at least 15 different Power 5 institutions making at least $500,000 annually did not take a pay cut during the pandemic.
The optics, at a minimum, are where these coaches are getting a penalty flag, especially as those they've chosen to lead have up until now had little to no say regarding their own financial freedom. Although not a holistic solution to escalating coaches’ salaries, the advent of NIL deregulation is a first step to better approximate the opportunities for student-athletes to leverage their NIL and financially benefit in a variety of ways while competing in college. That anticipated deregulation will land within some NCAA constructs tied to transparency, deterring recruiting inducements and abuses, and ensuring transactions are tied to fair market value.
Even in non-pandemic years, though, the escalating coaches’ salaries and swelling support staffs for sports like football and men’s basketball are increasingly disconnected from, and at odds with, the layered NCAA restrictions on resources that may be provided to student-athletes and, moreover, the limited financial opportunities for student-athletes to leverage their ability to generate income during, what is for many, the highest popularity window -- in college competing a Division I student-athlete. The drumbeat for a reset on these disparities is growing louder.
Of course the biggest salaries in FBS are found at the head coach level. Per USA Today’s FBS head coach salary and buyout database, at least six of the top 10 highest paid FBS head coaches -- all making above $6 million per season -- did not take any pay cut during the pandemic.
In addition to the contextual point about chipping in during the pandemic, there are over 30 FBS head coaches with $10 million buyouts (translate: if a university has no cause to terminate a head coach, the university is on the hook to pay a head coach his buyout to go away even if the reason is not enough winning enough). These provisions in coaches’ contracts are where significant dollars go to a coaches’ stocking. There are 16 head coaches with buyouts of $20M or higher with Clemson University Head Coach Dabo Swinney’s buyout at the top of the cash mountain at $50M. To be fair, the buyout provision is a customary way for institutions to financially protect against another school (or NFL team) wooing a school’s current (and presumably successful) head coach away without compensating for it. However, when head coaches move from one school to the next, it’s the second school that usually has to pay the first school just to have the ability to hire the coach -- meaning there’s a lot of cash outflow to make coaching changes these days.
It is true that boosters often help foot the buyout bill which helps the athletics department avoid criticism for depleting other funds that could have gone to support the overall athletics programs. And ultimately a booster who may solely be interested in supporting a football program may not be interested in a second or third option of helping the university’s academic scholarship fund or to refurbish the library. Just imagine, though, if half of this money going to buyouts did go back to fund general student population scholarships, mental health counseling, or new technologies in classrooms.
Another recent example of a sizable buyout as a Division I athletics program faced a significant revenue shortfall arose at the University of South Carolina when it dismissed its Head Football Coach Will Muschamp. South Carolina will provide Muschamp a $13.2M buyout. It has been reported that the University of South Carolina’s athletics department is facing a $44M revenue budget deficit.
Buyouts costing institutions significant amounts of money also recently played out with Auburn University’s dismissal of Head Football Coach Gus Malzhan who will be paid over $21M not to coach the Tigers. He was given a seven-year, $49M contract in 2017, and three years later he was given the pink slip, albeit one with a decidedly gold hue.
Football is not the only sport seeing escalating coaches’ salaries and significant buyouts. The top 12 highest paid Division I men’s basketball head coaches are making $3.8M or more with the University of Kentucky’s John Calipari making more than $8M per year.
Even when a head coach’s employment is scrutinized for potential cause, Division I schools are still agreeing to pay them millions of dollars to go away. As reported earlier this fall by KWCH, Wichita State University’s outgoing men’s basketball head coach Gregg Marshall was given a $7.75M buyout by the university that will be paid out over six years at $48,000 every two weeks. Marshall’s resignation marked the end of a more than month-long investigation into allegations of verbal and physical abuse. Wichita State hired a St. Louis-based firm to investigate the claims. The university said it will not make findings in the investigation public because they are considered confidential personnel records.
Even with NIL opportunities awaiting once legislative solutions at the state, federal, and/or NCAA levels can be ironed out that could eventually enable student-athletes to leverage the financial opportunities around college athletics, there still is a growing clamor to directly address escalating coaches’ salaries, possibly through a federal antitrust exemption.
What are college athletics stakeholders saying about the escalating coaches’ salaries? A lot.
As reported by the American Independent, “There's college coaches across the country making millions of dollars and that's not controversial, making off the backs of college athletes that are unpaid," Jordan Bohannon, University Iowa basketball student-athlete said in an interview. "We have a game on Christmas Day and our families can't even go to the game and we have to play, theoretically making money for these TV contracts that (conferences) signed. It blows my mind.”
As reported by ESPN. Rebecca Blank, chancellor at the University of Wisconsin-Madison, testified in a Senate hearing that she would "be more than happy" to discuss the possibility of an antitrust law exemption that would grant colleges the power to curb the rapidly increasing salaries of coaches in college sports. "I think that is appropriate for college sports," Blank told the members of the Senate Committee on Health, Education, Labor and Pensions. "I think it is somewhat outrageous that the highest-paid employee in many states is their state university college coach.”
As reported by ESPN, Senator Chris Murphy, (D-CT), who has been among Congress's most outspoken NCAA critics in the past year, said it was "patently absurd" that rules could prohibit a cap on coach compensation but allow a cap on player compensation.
As reported by Athletic Business, "I'm mortified at these salaries," said House Rep. Donna Shalala (D-FL), former President of University of Miami and Chancellor of University of Wisconsin. In early 2020, Shalala sponsored the CACIA Act of 2019, a bill that included a provision to examine the amount of funds expended on coaches’ salaries. "We have not been able to slow spending or expenditures."
“This has got to stop. It’s obscene enough that NCAA coaches are making millions while their players are getting little more than books and tuition. But it’s off-the-charts ridiculous to hand them contracts that continue paying them for failing to live up to expectations, while simultaneously cutting the school’s non-revenue producing programs.” – John Romano, Tampa Bay Times
As reported by The Guardian, college coach pay exists in an “artificial marketplace,” according to Andrew Zimbalist, an economist at Smith College. “It’s artificial in that athletes aren’t paid, athletic departments don’t have stockholders, and they may receive taxpayer subsidies for everything from stadium construction to their own salaries. What they have are stakeholders and these are boosters and alums and students and administrators who want to see the team win. A normal business operates to generate a profit and therefore they’re acutely cost conscious. This business operates with very little regard to cost because they’re all about winning.”
As a counterpoint, college coaches’ ability to negotiate soaring salaries isn’t their fault. Many will point out that million-dollar salaries are what the market bears. This is true. The reality is the soaring salaries are filling the pockets (or stockings) of the very few and are not going to support student-athletes’ well-being and success -- tenets central to NCAA Division I principles.
College athletics is at a crossroads as we head further down the 2020s road. The NIL oyster is about to be cracked and transfer eligibility is about to become streamlined (some liken it to free agency). NIL and more permissive transfer rules are student-athlete friendly changes. Yet, these policy pivots do not negate the need to still financially support student-athletes in this new framework.
Preserving more funds by deescalating coaches’ salaries could further student-athlete-centered objectives (e.g., degree completion; life skills training; graduate degree funding; career services and job placement) that align with NCAA principles. This outcome, using a hint of antitrust nomenclature, would further the ‘legitimate public interest’ of supporting student-athletes’ academically, athletically, and in life.
Whether a narrowly tailored antitrust exemption to cap college coaches’ salaries could be enacted to reroute those monies remains to be seen.
Athletics Veritas is presented for information purposes only and should not be considered advice or counsel on NCAA compliance matters. For guidance on NCAA rules and processes, always consult your university’s athletics compliance office, conference office, and/or the NCAA.
